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Looking Back at Mortgage Rates of 2015

Looking back at the last year, we can see that 2015 was an interesting year for the mortgage market. Going into the year, nearly everybody was expecting a move towards higher rates. However, Europe’s new bond buying program and various other factors made conditions right to instead see strong, long-lasting moves downward. Later on, the market saw some more turbulent moves in anticipation of the Fed’s rate hike.

The final word is that, on average, 2015 was a stronger year for mortgage rates than 2014. However, compared to 2014, 2015 saw more of an upward trend. Part of this can be attributed to the fact that 2014 ended on the very lowest rates of the year, while 2015 ended on rates that were close to the year’s highest.

We can likely expect rates to continue to rise for a while until the economy starts to show signs of stagnating. This could very well take months, or even years. Fortunately, any upward movements should be less dramatic than they have historically been.

Mortgage Rates Defy Jobs Report Again

Last week’s monthly jobs report proved to be quite strong, adding 292,000 jobs. This exceeded the predicted 211,000, and makes for a grand total of 2.65 million for the ear. At this point, we can see that 2015 was the second best year since 1999.

Usually, economic data like this is likely to send mortgage rates higher. In fact, a report this exceptional should have been a sure bet for a significant uptick. However, once again, mortgage rates are defying expectations. On the Friday following the report, rates actually moved down to achieve a two-month low.

Much of this can be attributed to weakness in other areas of the economy. Specifically, investors are concerned about the lack of income growth, the losses in global stock prices, the downturn of oil prices, and continued concerns about the implications of the Fed rate hike. They are therefore moving away from risky stocks to buy bonds, which moves mortgage rates lower. There is no telling how long this can last, though, so locking into current lows may be advisable.

Mortgage Rates at Lowest Since April

This year started out strong and, despite an exceptionally strong jobs report, the trend for mortgage rates has remained favorable. In fact, rates have been plummeting at their quickest pace recently, to the point where most brokers are offering quotes that are approaching seven month lows.

Current downward movement can be attributed to the heavy losses being seen in stocks and oil prices. Investors are currently reacting to the higher risks associated with these assets by taking money out of them. When this happens, they are generally putting their money into the relatively safer bond markets, which results in a dip in mortgage rates.

The big question to ask right now is whether we can expect stocks to bounce back soon, sending mortgage rates up again, or if this is the beginning of an even bigger sell-off, like the ones we saw following the peaks in 2000 and 2007. Since this is difficult to predict, it make it hard to decide whether to float or lock. However, with rates where they are, it’s hard to argue that it’s a good time to be in the market.

Delinquent Mortgages Down, Prepayment Up

The good news about the past year’s real estate market continues to come in. According to Black Knight Financial Services, the past twelve months brought us a substantial improvement in mortgage performance. It would appear that there was a 22% decrease in foreclosure inventory nationwide, and a 15% decrease in the number of delinquent mortgages.

The number of mortgage loans that were at least thirty days past due, but not in foreclosure proceedings. At the end of the year, there was a total of 2.41 million delinquent mortgages, representing a drop of about 425,000 from the end of 2014. Meanwhile, there was a total of 689,000 properties in the middle of foreclosure proceedings at the end of the year, representing a drop of about 9,000 from November and 192,000 from the end of 2014.

Black Knight also tells us that the rate of prepayment is also on the rise. In December, this metric was higher than it was in the end of 2014.

Home Affordability is Up, but On its Way Down

Black Knight Financial Services took a close look at trends in home affordability and the recent surge in cash-out refinances, as it applies up through the end of December. According to the data they gathered, there have now been a total of forty-three consecutive months of annual appreciation in home prices. Further, through the use of national medians of home prices and household incomes, they found that the ratios of mortgage payment-to-income remain favorable, according to historic standards.

When the group looked at the median principal and interest payments for October of the last fifteen years, they observed that such payments consumed fully 26% of a median household’s income in 2000, rising to a peak of 33% in 2006, and then falling all the way down to 18% in 2012. In October of 2015, this figure was at 21%, below the median of 26% for the past fifteen years and within the realm of reasonable affordability.

Unfortunately, the trend seems to be upward. The group is projecting that median principal and interest payments will reach 24% of median income in 2016, and surpass the median in 2017

Mortgage Rates Drop to Lowest in Twelve Months

This week opened with a sharp drop in mortgage rates. Most lenders have been offering their lowest quotes in almost a year. While many others have been sticking with Friday’s rates, they have been pairing these with lower closing costs.

Generally, you can’t expect rates to move this dramatically more than twenty times throughout a single year. In this case, the drop can be attributed to MBS, or “mortgage-backed securities”, representing the bonds that are most closely related to mortgage rates. When trading is calm, such bonds behave like you might expect from the interest rate world, but when the rest of the interest rate world is rapidly moving lower, they have a tendency to underperform. Therefore, when ten-year treasuries were down 10bps on Monday, lenders adjusted their mortgage rates accordingly.

Should market trading levels hold their ground, mortgage rates could very well drop even further. Of course, the risk of a significant bounce offset the possible benefits of floating. Locking into the current lows is the best choice for most people.

Mortgage Rates Jump Going Into Long Weekend

Mortgage rates jumped rapidly on Friday, with losses among the worst so far in the year. However, as young as the year is, the outright levels are only the fourth lowest in the past twelve months.

It’s no mystery why we’re experiencing such a dramatic upturn. After all, with the prodigious moves toward lower rates we have experienced in the past months, it’s only natural that we should experience a bounce-back. The question that is on many investors’ minds right now is whether this represents the start of a long-term trend, or if this is simply the product of the caution that is so often practiced heading into a three-day weekend, combined with the activity of stock and oil traders covering short positions.

If you failed to lock into rates before this reversal, don’t worry too much. It is entirely possible that rates will recover to their 2016 lows in the near future. However, considering the relative overall strength of mortgage rates, it’s not the worst thing in the world to lock in.

Foreclosures Up for Much of the Nation

Looking back at January, we can see that the rate of foreclosures was down on a month-over-month basis. Unfortunately, completed foreclosures showed a significant upturn on an annual basis.

According to RealtyTrac, there was a total of 95,186 filings in January. This includes foreclosure starts, notices of default, and completed foreclosures. This number represents the lowest figure since July of 2006, as well as an 8% decrease from December and an 11% decrease from January of 2015. Further, completed foreclosures alone were down by 26% from December, but up 32% from January of 2015.

Some states showed worse figures than the national average. Twelve states and the District of Columbia experienced an increase in foreclosure starts, with Oklahoma leading the nation with a whopping 289% increase. Meanwhile, completed foreclosures were up in 34 states and the District of Columbia; New York saw the worst increase with 263%, followed by Texas, New Jersey, Georgia, and Maryland.

Strong Jobs Report Fuels Upward Trend in Mortgage Rates

The recent jobs report came out significantly stronger than was initially expected. February experienced a payroll growth of 242k, compared to the projected 190k. Meanwhile, the national unemployment rate held at 4.9%; considering that there are more people entering the workforce, this is a favorable figure. All in all, it would seem that the economy is doing better than was indicated by the popular opinions of the past two months.

Since this employment data is one of the most important factors influencing the bond markets underlying mortgage rates, good news in the jobs report often equals bad news in the mortgage market. It is therefore that, on the fourth, we observed a moderate jump in rates. However, relative to the recent upward movement that the market has been experiencing, the move wasn’t terribly dramatic. In fact, it’s the steady upward momentum of mortgage rates that may have prevented a sharper reaction to the recent jobs report.

Many experts are surprised that rates are not higher than they are right now, and are projecting further increases in the near future. If you are looking to secure a new mortgage loan, the good money is on locking into current rates.

Mortgage Rates Improve Slightly Before Fed Announcement

Mortgage rates inched lower going into the third week of March as bonds leveled off. Unfortunately, this improvement was not enough to fully reverse the recent upward trend. Rates last Friday were at their highest levels the market had seen since late January, and we’re currently not much better off.

The question right now is whether this downward movement represents a new trend, or a one-time anomaly. Though it is possible that we will continue to see more improvement in the short term, it is also possible that this recent improvement is due to financial markets calming down on the week of the big Federal Reserve statement coming up on Wednesday. Once this announcement is made, we can expect a big reaction from the financial markets. If the economic outlook is positive enough, we could easily see mortgage rates jump significantly higher by the end of the week. If the data is weak, mortgage rates may ease a bit. There’s no way to anticipate in which direction they will move at this point.